The signal transducer and activator of transcription factor 5 (Stat5) plays a very important role in functions of a broad spectrum of cytokines. Upon binding of cytokines to their receptors, Stat5 is tyrosine-phosphorylated (at Tyr694 of Stat5A) by activated Janus protein tyrosine kinases (Jaks), forms a dimer, translocates to the nucleus, and turns on a variety of cytokine-inducible genes. Although much is known about the process of Stat5 activation, little is known about the mechanism by which the tyrosine-phosphorylated Stat5 is inactivated. Our recent studies demonstrate that inactivation of the tyrosine-phosphorylated Stat5 is via dephosphorylation. Using peptides corresponding to the Stat5A tyrosine phosphorylation site, we identified the protein-tyrosine phosphatase, Shp-2, as a Stat5 phosphatase. Shp-2 specifically interacts with Stat5 under physiological conditions in a tyrosine-phosphorylation-dependent manner. Over-expression of Shp-2 attenuates cytokine-induced tyrosine phosphorylation of Stat5, whereas Shp-2 deficiency dramatically delays the dephosphorylation of Stat5. Shp-2 normally exists as an inactive form in cells, inhibited by binding of its own N-terminal SH2 domain to its catalytic domain. Our preliminary data show that the SH2 domains of Shp-2 do not directly interact with tyrosine-phosphorylated Stat5. Using the tyrosine-phosphorylated Stat5A peptides, we have co-purified the adapter protein, CrkL, with Shp-2. CrkL is able to associate with both Stat5 and Shp-2 in cells. Moreover, preliminary data show that over-expression of CrkL in cells accelerates the dephosphorylation of Star5. Based on these findings, we hypothesize that Shp-2 is a specific Stat5 phosphatase that is recruited to tyrosine-phosphorylated Stat5 and released from an inactive form to an active one by the adapter protein CrkL. Upon cytokine stimulation, activated Jaks phosphorylate Stat5 and the adapter protein CrkL. Tyrosine-phosphorylated Stat5 and CrkL form a complex, and subsequently, tyrosine-phosphorylated CrkL recruits Shp-2 to the complex through interaction of the sole phosphotyrosine of CrkL with SH2 domains of Shp-2, leading to activation of Shp2. Consequently, the activated Shp-2 accesses and dephosphorylates tyrosine-phosphorylated Stat5. To test our hypothesis, we will 1) identify the domains of Stat5 and Shp-2 that are required for Stat5 interaction with Shp-2, 2) determine the role of CrkL in Stat5 interaction with, and dephosphorylation by, Shp-2, and 3) study the physiological role of Stat5 dephosphorylation. The proposed research will contribute to understanding of the mechanism of Stat5 inactivation, provide more clues to the molecular pathogenesis of numerous diseases including hematological malignancies, and help identify targets for specific therapies.